Fidelity Taxable Question: Vanguard ETF VS Fidelity Index Fund

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Hiwatter
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Fidelity Taxable Question: Vanguard ETF VS Fidelity Index Fund

Post by Hiwatter »

Say I have $100,000 to invest in my Fidelity Brokerage Account

Would it be better in regards to taxes, fees, other factors, etc, to:

A). Purchase VTI (Vanguard Total US Market ETF)

B). Purchase FSKAX (Fidelity Total US Market Index Fund)

So, ETF VS Index Funds... now that Vanguard ETF's trade free in Fidelity Accounts, should I be set on an ETF?

FSKAX distributes the dividends, where as VTI does not...? (tax advantage VTI since its a Taxable account?)

What am I overlooking? Feel free to school me.

Thanks
Last edited by Hiwatter on Mon Aug 17, 2020 4:57 pm, edited 1 time in total.
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anon_investor
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Re: Fidelity Taxable Question: Vanguard ETF VS Fidelity Index Fund

Post by anon_investor »

Hiwatter wrote: Mon Aug 17, 2020 4:52 pm Say I have $100,000 to invest in my Fidelity Brokerage Account

Would it be better in regards to taxes, fees, other factors, etc, to:

A). Purchase VTI (Vanguard Total US Market ETF)

B). Purchase FSKAX (Fidelity Total US Market Index Fund)

So, ETF VS Index Funds... now that Vanguard ETF's trade free in Fidelity Accounts, should I be set on an ETF?

FSKAX distributes the dividends, where as VTI does not...? (tax advantage VTI? in Taxable)

What am I overlooking? Feel free to school me.

Thanks
VTI, no brainer. While they both have dividends, VTI does not have capital gains distributions like FSKAX. VTI is just more tax efficient.
lazynovice
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Re: Fidelity Taxable Question: Vanguard ETF VS Fidelity Index Fund

Post by lazynovice »

FSKAX expense ratio .015%
VTI expense ratio .03%

All of this math is back of the envelope so you’ll need to do the real math on your own.

FSKAX last twelve months of dividends $1.614 Per share; last twelve months of capital gains $0 per share (this has not always been the case)
VTI last twelve months of dividends $2.899 per share

Because the NAV of FSKAX (95) is roughly half the share price of VTI (171), you have to double the FSKAX distributions to compare. That brings FSKAX to higher distributions- roughly $3.228 per equivalent share.

Both trade free at Fidelity.

VTI will have a bid/ask spread. The 30 day median is .01% per share. That is roughly a penny or two a share. (171 times .0001) You’ll pay this going in and coming out.

The 30 day premium is .03% per share. In theory, you should get the premium back when you sell, but no guarantee. That is about 5 cents a share. (171 times .0003)

There are conveniences and inconveniences of ETFs and mutual funds. You have to decide what you care about.

I own both but I prefer VTI.
marcopolo
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Re: Fidelity Taxable Question: Vanguard ETF VS Fidelity Index Fund

Post by marcopolo »

For me, portability would be a bigger concern.

If Fidelity's customer service ever deteriorates to the level of some other brokerages, one can easily move an ETF, moving a mutual fund may have significantly more costs in either taxes, or fees at new brokerage.

The tax drag of the Fidelity funds is real, but the actual impact is way over blown. It is about on the same order as the difference in ERs (Fidelity is lower that Vanguard funds in that respect).
Once in a while you get shown the light, in the strangest of places if you look at it right.
ChiKid24
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Re: Fidelity Taxable Question: Vanguard ETF VS Fidelity Index Fund

Post by ChiKid24 »

Have you considered FZROX? To me that would be the fund to compare to VTI. I'd probably still go VTI though in a taxable.
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LiveSimple
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Re: Fidelity Taxable Question: Vanguard ETF VS Fidelity Index Fund

Post by LiveSimple »

Both options are good, it comes to do you want to automate the purchase or click to put the order and transfer money.
SnowBog
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Re: Fidelity Taxable Question: Vanguard ETF VS Fidelity Index Fund

Post by SnowBog »

marcopolo wrote: Mon Aug 17, 2020 11:56 pm For me, portability would be a bigger concern.
This is my primary factor in taxable, where I favor ETF for portability (and maybe a slight - and likely debatable advantage for TLH).

Edited to add - Fidelity support for no cost fractional ETF is what changed my mind, wouldn't feel the same without that.
mega317
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Re: Fidelity Taxable Question: Vanguard ETF VS Fidelity Index Fund

Post by mega317 »

Any differences here are small and it’s going to come down to personal preference. I very slightly prefer mutual funds to ETFs so in your position I would do the tax math as above, but would be willing to pay a slight premium to use the mutual fund. Everyone is different.
https://www.bogleheads.org/forum/viewtopic.php?t=6212
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Hiwatter
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Re: Fidelity Taxable Question: Vanguard ETF VS Fidelity Index Fund

Post by Hiwatter »

Thanks all

So maybe just continuing to roll with FSKAX isn't as bad as I first thought... I have a ton of it already in my Fidelity Taxable account. I guess in my mind, and based off some things I've read, it seemed like FSKAX distributed a lot of capital gains each year resulting in a tax consequence for me.

I don't plan on leaving Fidelity for Vanguard ever, so I don't care much about "portability". What other advantages other than the trade time in the day does an ETF provide in Taxable?

Thanks again
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anon_investor
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Re: Fidelity Taxable Question: Vanguard ETF VS Fidelity Index Fund

Post by anon_investor »

Hiwatter wrote: Tue Aug 18, 2020 10:57 am Thanks all

So maybe just continuing to roll with FSKAX isn't as bad as I first thought... I have a ton of it already in my Fidelity Taxable account. I guess in my mind, and based off some things I've read, it seemed like FSKAX distributed a lot of capital gains each year resulting in a tax consequence for me.

I don't plan on leaving Fidelity for Vanguard ever, so I don't care much about "portability". What other advantages other than the trade time in the day does an ETF provide in Taxable?

Thanks again
What is your Fed/State tax bracket? Based on that you can determine how much of a tax impact FSKAX has for you. For a taxable account at Fidelity, that is really the only downside I see for FSKAX, the forced annual capital gains distributions (these are separate from the dvididends). The capital gains distributions create a tax drag, that long term can add up. Obviously how bad the tax drag is, really depends on your tax brackets and how large of a portfolio you have. For example, someone with $1 million of FSKAX in their taxable at the very highest Federal and California tax brackets, will see a much more significant tax drag than someone with only $10k in a medium Federal tax bracket and no state income tax.
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Hiwatter
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Re: Fidelity Taxable Question: Vanguard ETF VS Fidelity Index Fund

Post by Hiwatter »

anon_investor wrote: Tue Aug 18, 2020 11:02 am
Hiwatter wrote: Tue Aug 18, 2020 10:57 am Thanks all

So maybe just continuing to roll with FSKAX isn't as bad as I first thought... I have a ton of it already in my Fidelity Taxable account. I guess in my mind, and based off some things I've read, it seemed like FSKAX distributed a lot of capital gains each year resulting in a tax consequence for me.

I don't plan on leaving Fidelity for Vanguard ever, so I don't care much about "portability". What other advantages other than the trade time in the day does an ETF provide in Taxable?

Thanks again
What is your Fed/State tax bracket? Based on that you can determine how much of a tax impact FSKAX has for you. For a taxable account at Fidelity, that is really the only downside I see for FSKAX, the forced annual capital gains distributions (these are separate from the dvididends). The capital gains distributions create a tax drag, that long term can add up. Obviously how bad the tax drag is, really depends on your tax brackets and how large of a portfolio you have. For example, someone with $1 million of FSKAX in their taxable at the very highest Federal and California tax brackets, will see a much more significant tax drag than someone with only $10k in a medium Federal tax bracket and no state income tax.
I'm in the 22% tax bracket. Reside in Washington State (no State income tax)

I currently have about $400K in FSKAX

Trying to determine if I should keep adding to FSKAX or start adding new money to Vanguard's VTI (in my Fidelity taxable).

Thanks
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Re: Fidelity Taxable Question: Vanguard ETF VS Fidelity Index Fund

Post by anon_investor »

Hiwatter wrote: Tue Aug 18, 2020 11:20 am
anon_investor wrote: Tue Aug 18, 2020 11:02 am
Hiwatter wrote: Tue Aug 18, 2020 10:57 am Thanks all

So maybe just continuing to roll with FSKAX isn't as bad as I first thought... I have a ton of it already in my Fidelity Taxable account. I guess in my mind, and based off some things I've read, it seemed like FSKAX distributed a lot of capital gains each year resulting in a tax consequence for me.

I don't plan on leaving Fidelity for Vanguard ever, so I don't care much about "portability". What other advantages other than the trade time in the day does an ETF provide in Taxable?

Thanks again
What is your Fed/State tax bracket? Based on that you can determine how much of a tax impact FSKAX has for you. For a taxable account at Fidelity, that is really the only downside I see for FSKAX, the forced annual capital gains distributions (these are separate from the dvididends). The capital gains distributions create a tax drag, that long term can add up. Obviously how bad the tax drag is, really depends on your tax brackets and how large of a portfolio you have. For example, someone with $1 million of FSKAX in their taxable at the very highest Federal and California tax brackets, will see a much more significant tax drag than someone with only $10k in a medium Federal tax bracket and no state income tax.
I'm in the 22% tax bracket. Reside in Washington State (no State income tax)

I currently have about $400K in FSKAX

Trying to determine if I should keep adding to FSKAX or start adding new money to Vanguard's VTI (in my Fidelity taxable).

Thanks
Looking on the Fidelity website, I cannot tell whether the Capital Gains distributions for FSKAX were long or short term:
https://fundresearch.fidelity.com/mutua ... /315911693
But just doing the math for someone in the 22% Federal Income Tax bracket and no state income tax the tax drag for FSKAX would have been between 0.023% to 0.034% for 2018 and 2019. So when you factor in bid/ask spreads for VTI and its slightly higher expense ratio (0.03% vs. 0.015%), then I would probably say for you just sticking with FSKAX is perfectly fine as the tax drag for your current sitaution is acceptable.

There are a lot of benefits to simplicity. The fact that you have been diligent enough to accumulate $400k in FSKAX says a lot. Keep up the good work and keep piling on to FSKAX. Behaviorally you are doing great, I see no benefit of changing what you are doing.
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Hiwatter
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Re: Fidelity Taxable Question: Vanguard ETF VS Fidelity Index Fund

Post by Hiwatter »

anon_investor wrote: Tue Aug 18, 2020 11:41 am
Hiwatter wrote: Tue Aug 18, 2020 11:20 am
anon_investor wrote: Tue Aug 18, 2020 11:02 am
Hiwatter wrote: Tue Aug 18, 2020 10:57 am Thanks all

So maybe just continuing to roll with FSKAX isn't as bad as I first thought... I have a ton of it already in my Fidelity Taxable account. I guess in my mind, and based off some things I've read, it seemed like FSKAX distributed a lot of capital gains each year resulting in a tax consequence for me.

I don't plan on leaving Fidelity for Vanguard ever, so I don't care much about "portability". What other advantages other than the trade time in the day does an ETF provide in Taxable?

Thanks again
What is your Fed/State tax bracket? Based on that you can determine how much of a tax impact FSKAX has for you. For a taxable account at Fidelity, that is really the only downside I see for FSKAX, the forced annual capital gains distributions (these are separate from the dvididends). The capital gains distributions create a tax drag, that long term can add up. Obviously how bad the tax drag is, really depends on your tax brackets and how large of a portfolio you have. For example, someone with $1 million of FSKAX in their taxable at the very highest Federal and California tax brackets, will see a much more significant tax drag than someone with only $10k in a medium Federal tax bracket and no state income tax.
I'm in the 22% tax bracket. Reside in Washington State (no State income tax)

I currently have about $400K in FSKAX

Trying to determine if I should keep adding to FSKAX or start adding new money to Vanguard's VTI (in my Fidelity taxable).

Thanks

Looking on the Fidelity website, I cannot tell whether the Capital Gains distributions for FSKAX were long or short term:
https://fundresearch.fidelity.com/mutua ... /315911693
But just doing the math for someone in the 22% Federal Income Tax bracket and no state income tax the tax drag for FSKAX would have been between 0.023% to 0.034% for 2018 and 2019. So when you factor in bid/ask spreads for VTI and its slightly higher expense ratio (0.03% vs. 0.015%), then I would probably say for you just sticking with FSKAX is perfectly fine as the tax drag for your current sitaution is acceptable.

There are a lot of benefits to simplicity. The fact that you have been diligent enough to accumulate $400k in FSKAX says a lot. Keep up the good work and keep piling on to FSKAX. Behaviorally you are doing great, I see no benefit of changing what you are doing.
Thank you. I appreciate your feedback greatly. I'll probably just keep going down the path I've been on for the last 4 years!
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Re: Fidelity Taxable Question: Vanguard ETF VS Fidelity Index Fund

Post by BroIceCream »

Hiwatter wrote: Tue Aug 18, 2020 10:57 am So maybe just continuing to roll with FSKAX isn't as bad as I first thought... I have a ton of it already in my Fidelity Taxable account. I guess in my mind, and based off some things I've read, it seemed like FSKAX distributed a lot of capital gains each year resulting in a tax consequence for me.

I don't plan on leaving Fidelity for Vanguard ever, so I don't care much about "portability". What other advantages other than the trade time in the day does an ETF provide in Taxable?
Note that Fidelity does have the ITOT ETF (iShares Total Market, but it is just as free as VTI. I use ITOT or FSKAX, depending upon on whether I want a MF or ETF in my various account types. It also provides some flexibility in TLH to avoid wash-sale rule.
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Re: Fidelity Taxable Question: Vanguard ETF VS Fidelity Index Fund

Post by avp »

BroIceCream wrote: Tue Aug 18, 2020 4:32 pm Note that Fidelity does have the ITOT ETF (iShares Total Market, but it is just as free as VTI. I use ITOT or FSKAX, depending upon on whether I want a MF or ETF in my various account types. It also provides some flexibility in TLH to avoid wash-sale rule.
ITOT and FSKAX are different enough to avoid wash-sale when TLH in a taxable?
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Re: Fidelity Taxable Question: Vanguard ETF VS Fidelity Index Fund

Post by oscarsonthepond »

What I settled on for my accounts after looking into it:

Fidelity Taxable => VTI
Fidelity Tax-Advantaged => FZROX
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Re: Fidelity Taxable Question: Vanguard ETF VS Fidelity Index Fund

Post by anon_investor »

oscarsonthepond wrote: Tue Aug 18, 2020 9:23 pm What I settled on for my accounts after looking into it:

Fidelity Taxable => VTI
Fidelity Tax-Advantaged => FZROX
+1
increment
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Re: Fidelity Taxable Question: Vanguard ETF VS Fidelity Index Fund

Post by increment »

anon_investor wrote: Tue Aug 18, 2020 11:41 am Looking on the Fidelity website, I cannot tell whether the Capital Gains distributions for FSKAX were long or short term:
https://fundresearch.fidelity.com/mutua ... /315911693
I'd think that these distributions are taxed at the long-term rate. For funds, short-term capital gains are just rolled into the standard dividend.
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Re: Fidelity Taxable Question: Vanguard ETF VS Fidelity Index Fund

Post by ruralavalon »

In a taxable account at Fidelity for U.S. stocks either:
1) Vanguard Total Stock Market ETF (VTI) ER 0.03%; or
2) iShares Core S&P Total US Stock Market ETF (ITOT) ER 0.03%.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
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Re: Fidelity Taxable Question: Vanguard ETF VS Fidelity Index Fund

Post by anon_investor »

increment wrote: Wed Aug 19, 2020 9:32 am
anon_investor wrote: Tue Aug 18, 2020 11:41 am Looking on the Fidelity website, I cannot tell whether the Capital Gains distributions for FSKAX were long or short term:
https://fundresearch.fidelity.com/mutua ... /315911693
I'd think that these distributions are taxed at the long-term rate. For funds, short-term capital gains are just rolled into the standard dividend.
Is that how Fidelity does it? For Vanguard funds that have capital gains distributions, there are separate distributions for long and short, and additional distributions for dividends.

I would think it would be odd to have short term capital gains distributions rolled into dividends, since for Total US Market funds the dividends are usualy 90%+ qualified.
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Re: Fidelity Taxable Question: Vanguard ETF VS Fidelity Index Fund

Post by RomeoMustDie »

Hiwatter wrote: Mon Aug 17, 2020 4:52 pm Say I have $100,000 to invest in my Fidelity Brokerage Account

Would it be better in regards to taxes, fees, other factors, etc, to:

A). Purchase VTI (Vanguard Total US Market ETF)

B). Purchase FSKAX (Fidelity Total US Market Index Fund)

So, ETF VS Index Funds... now that Vanguard ETF's trade free in Fidelity Accounts, should I be set on an ETF?

FSKAX distributes the dividends, where as VTI does not...? (tax advantage VTI since its a Taxable account?)

What am I overlooking? Feel free to school me.

Thanks
Mutual funds are better for a passive investor since you can't watch daily movements like you can with ETF's and it encourages being hands off.
mega317
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Re: Fidelity Taxable Question: Vanguard ETF VS Fidelity Index Fund

Post by mega317 »

You can just watch daily movements of efts that holds the same stocks. Or indexes that are related. Or bogleheads threads. I don’t think that’s much of a reason.
https://www.bogleheads.org/forum/viewtopic.php?t=6212
SnowBog
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Re: Fidelity Taxable Question: Vanguard ETF VS Fidelity Index Fund

Post by SnowBog »

Hiwatter wrote: Tue Aug 18, 2020 10:57 am I don't plan on leaving Fidelity for Vanguard ever, so I don't care much about "portability". What other advantages other than the trade time in the day does an ETF provide in Taxable?
Keep in mind, "portability" isn't limited to you leaving Fidelity. It's specific to your shares leaving Fidelity.

I gift highly appreciated shares to my child's UTMA account annually. So long as I stay under the "kiddie tax" limits, this is a low cost, low tax way of saving for college. (I also use 529.)

But I also recently gifted appreciated shares to my nephew as a graduation present. It was a small amount (even smaller if you factor my cost basis). At his current income, he'll pay 0% tax on the gains, and this forced him to open up an investing account, and ideally taught him the benefits of investing and compound interest. (I also gave him the book version of "if you can". We'll see if it helps in 20+ years...)

I'd assume similar if you gifted to a charity (haven't tried with shares yet).

If you have a "portable" holding, such as most ETFs, then the recipient can use (most) any brokerage they want, they aren't limited to Fidelity. And the shares are transfered "in kind", so they'll get your cost basis, purchase date, etc.

If you try doing that with something like FSKAX, it would need to be sold in your account first since it's not portable.
Last edited by SnowBog on Fri Aug 28, 2020 10:52 pm, edited 1 time in total.
SnowBog
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Re: Fidelity Taxable Question: Vanguard ETF VS Fidelity Index Fund

Post by SnowBog »

anon_investor wrote: Tue Aug 18, 2020 9:34 pm
oscarsonthepond wrote: Tue Aug 18, 2020 9:23 pm What I settled on for my accounts after looking into it:

Fidelity Taxable => VTI
Fidelity Tax-Advantaged => FZROX
+1
+1

I do the same, ETF in taxable, FZROX in tax-advantaged.

But I also built a list of TLH pairs, and with the volatility we saw earlier this year ended up with my money in a different ETF after a couple of TLH executions - now with high enough gains I'll likely keep it there. But the same would have happened with a mutual fund.
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Re: Fidelity Taxable Question: Vanguard ETF VS Fidelity Index Fund

Post by Chip »

anon_investor wrote: Wed Aug 19, 2020 10:10 am Is that how Fidelity does it? For Vanguard funds that have capital gains distributions, there are separate distributions for long and short, and additional distributions for dividends.

I would think it would be odd to have short term capital gains distributions rolled into dividends, since for Total US Market funds the dividends are usualy 90%+ qualified.
Treating mutual fund short term capital gain distributions as dividends is an IRS requirement. While the fund may break them out separately on their website, the 1099-DIV will definitely have those ST distributions included in the ordinary dividends number. This applies to Vanguard, Fidelity, et al.

Here's some info from a FAQ from Nicholas Funds (emphasis is mine):
What are the tax implications of distributions to shareholders?

Shareholders -- except those in tax-sheltered accounts such as Individual Retirement and 401(k) and 403(b) accounts -- are required to pay taxes on distributions, whether the distributions are paid out in cash or reinvested in additional shares. Long-term capital gain distributions are taxed at long-term capital gains tax rates; distributions from short-term capital gains and net investment income (interest and dividends) are taxed as dividends at ordinary income tax rates. Ordinary income tax rates generally are higher than long-term capital gains tax rates.
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Re: Fidelity Taxable Question: Vanguard ETF VS Fidelity Index Fund

Post by anon_investor »

Chip wrote: Sat Aug 29, 2020 5:28 am
anon_investor wrote: Wed Aug 19, 2020 10:10 am Is that how Fidelity does it? For Vanguard funds that have capital gains distributions, there are separate distributions for long and short, and additional distributions for dividends.

I would think it would be odd to have short term capital gains distributions rolled into dividends, since for Total US Market funds the dividends are usualy 90%+ qualified.
Treating mutual fund short term capital gain distributions as dividends is an IRS requirement. While the fund may break them out separately on their website, the 1099-DIV will definitely have those ST distributions included in the ordinary dividends number. This applies to Vanguard, Fidelity, et al.

Here's some info from a FAQ from Nicholas Funds (emphasis is mine):
What are the tax implications of distributions to shareholders?

Shareholders -- except those in tax-sheltered accounts such as Individual Retirement and 401(k) and 403(b) accounts -- are required to pay taxes on distributions, whether the distributions are paid out in cash or reinvested in additional shares. Long-term capital gain distributions are taxed at long-term capital gains tax rates; distributions from short-term capital gains and net investment income (interest and dividends) are taxed as dividends at ordinary income tax rates. Ordinary income tax rates generally are higher than long-term capital gains tax rates.
Okay, so then short term capital gains distributions (if any) are treated as unqualified dividends. The capital gains distribution even though all treated as long term still generate enough of a tax drag at the 22% tax bracket to more than nullify the cost savings on ER between the Fidelity mutual fund and Vanguard ETF.
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Re: Fidelity Taxable Question: Vanguard ETF VS Fidelity Index Fund

Post by UpperNwGuy »

anon_investor wrote: Sat Aug 29, 2020 7:22 am
Chip wrote: Sat Aug 29, 2020 5:28 am
anon_investor wrote: Wed Aug 19, 2020 10:10 am Is that how Fidelity does it? For Vanguard funds that have capital gains distributions, there are separate distributions for long and short, and additional distributions for dividends.

I would think it would be odd to have short term capital gains distributions rolled into dividends, since for Total US Market funds the dividends are usualy 90%+ qualified.
Treating mutual fund short term capital gain distributions as dividends is an IRS requirement. While the fund may break them out separately on their website, the 1099-DIV will definitely have those ST distributions included in the ordinary dividends number. This applies to Vanguard, Fidelity, et al.

Here's some info from a FAQ from Nicholas Funds (emphasis is mine):
What are the tax implications of distributions to shareholders?

Shareholders -- except those in tax-sheltered accounts such as Individual Retirement and 401(k) and 403(b) accounts -- are required to pay taxes on distributions, whether the distributions are paid out in cash or reinvested in additional shares. Long-term capital gain distributions are taxed at long-term capital gains tax rates; distributions from short-term capital gains and net investment income (interest and dividends) are taxed as dividends at ordinary income tax rates. Ordinary income tax rates generally are higher than long-term capital gains tax rates.
Okay, so then short term capital gains distributions (if any) are treated as unqualified dividends. The capital gains distribution even though all treated as long term still generate enough of a tax drag at the 22% tax bracket to more than nullify the cost savings on ER between the Fidelity mutual fund and Vanguard ETF.
So what would the FSKAX tax drag per $10,000 invested have been in 2019? How many capital gains distributions did FSKAX make? Does it really nullify the cost savings on ER when you actually run the numbers?
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Re: Fidelity Taxable Question: Vanguard ETF VS Fidelity Index Fund

Post by Chip »

anon_investor wrote: Sat Aug 29, 2020 7:22 am Okay, so then short term capital gains distributions (if any) are treated as unqualified dividends. The capital gains distribution even though all treated as long term still generate enough of a tax drag at the 22% tax bracket to more than nullify the cost savings on ER between the Fidelity mutual fund and Vanguard ETF.
In 2019 FSKAX (Fidelity Total Market Index Fund) was more tax efficient than VTI/VTSAX for investors in all tax brackets except for those with state tax rates greater than 8%. Plus it had a lower ER.

I believe that's the first year that it's happened. I think it's unlikely to happen often in the future (at least until Vanguard's patent expires), but the point is that it's not much of a tax drag. There are many other issues that investors should worry about before this one.
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Re: Fidelity Taxable Question: Vanguard ETF VS Fidelity Index Fund

Post by JoMoney »

I've been in the process of consolidating things to Fidelity myself. I still have some taxable funds at Vanguard.
I've funneling the money into my IRAs at Fidelity and using FIdelity's 500 Index fund in those. If I was going to own funds in my taxable Fidelity account, I would go with the Vanguard ETF, from a buy and hold perspective I'm not sure if the tax advantage of the ETF is significant, nor if the market spreads and variance from NAV involved with ETF transactions is... and I do find the process of submitting marketable orders during the trading day annoying relative to knowing a mutual fund will receive the end-of-day NAV and can automate new investments... I could make a justification to go either way, but would give the edge to the ETF because I like the idea that I can easily transfer that to a different brokerage without feeling 'trapped' that it might create a taxable event.
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Re: Fidelity Taxable Question: Vanguard ETF VS Fidelity Index Fund

Post by lazynovice »

Chip wrote: Sat Aug 29, 2020 8:12 am
anon_investor wrote: Sat Aug 29, 2020 7:22 am Okay, so then short term capital gains distributions (if any) are treated as unqualified dividends. The capital gains distribution even though all treated as long term still generate enough of a tax drag at the 22% tax bracket to more than nullify the cost savings on ER between the Fidelity mutual fund and Vanguard ETF.
In 2019 FSKAX (Fidelity Total Market Index Fund) was more tax efficient than VTI/VTSAX for investors in all tax brackets except for those with state tax rates greater than 8%. Plus it had a lower ER.

I believe that's the first year that it's happened. I think it's unlikely to happen often in the future (at least until Vanguard's patent expires), but the point is that it's not much of a tax drag. There are many other issues that investors should worry about before this one.
Do you think Fidelity will add an ETF share class to FSKAX in 2023 or will they start a new fund with two share classes? That’s what I’d like to know.
Chip
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Re: Fidelity Taxable Question: Vanguard ETF VS Fidelity Index Fund

Post by Chip »

lazynovice wrote: Sat Aug 29, 2020 10:08 am Do you think Fidelity will add an ETF share class to FSKAX in 2023 or will they start a new fund with two share classes? That’s what I’d like to know.
I have absolutely no idea if they will even do it, much less how. Speculating wildly, the fact that they merged a few different funds into FSKAX a few years ago, rather than keeping them separate, might make us think they want to keep things simple.
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